Interview: No Ifs, No Butts
Unions: National Focus
Industrial: Fools Gold
Bad Boss: Bones of Contention
History: The Gong Show
Politics: The Hawke Legacy
International: Sick Nation
Economics: Closed Minds
Review: Mixing Pop and Politics
Poetry: One Size Fits All
The Locker Room
The Monk Off Our Back
The $140 Million Patriot
On September 17, Richard Grasso resigned as chairman and CEO of the exchange. Public details of his compensation (including a deferred payout of $140 million) had ignited a storm of outrage - especially among key pension funds and other financial heavyweights.
With investors struggling to rebuild their faith in the wake of accounting scandals and the dot-com meltdown, this revelation of blatant excess and cronyism at the heart of finance capitalism was too much to take. Grasso's compensation was hardly the most obscene in U.S. business. Compared to the $706 million that Oracle CEO Lawrence Ellison took home in 2001, for example, it looked downright humble. Nevertheless, the writing was on the wall. After all, Grasso didn't actually run a real business, producing things of real value to real human beings; he ran a glorified casino. And the dealer's take in this particular card game was far too rich for the main players to tolerate.
Ironically, Grasso's exit came two years to the day after his finest moment. On September 17, 2001, Grasso rang the bell to re-open the Big Board after the terrorist attacks of September 11 closed the market for four business days - its longest closure since the 1930s.
That week, Grasso was a national hero. Even as the dust was settling over Lower Manhattan, TV stations broke away from White House press briefings to provide live coverage of his updates on the exchange's efforts to re-open. Then Grasso presided over a ceremony, both sombre and jingoistic, as trading recommenced. The bald, 5-foot 7-inch chairman punched above his weight as he ominously promised, "Those who took those buildings down will hear from us soon."
His stand won widespread public acclaim. "He's the best chairman we've ever had," enthused one Wall Street CEO. Asked about his determination to re-open as quickly as possible after the attacks, Grasso said, "One of the things you must do is restore people's confidence" - words that would haunt him just two years later.
In concrete economic terms, re-opening the stock market was an irrelevant event. In fact, if a more panicked sell-off had occurred (as it was, the markets shed something like $750 billion in paper wealth that first day), it would have been counterproductive. But in America, the stock market is not just an economic institution. It symbolizes the nation's reason for existence. Ringing the bell, and reigniting the frenzied paper chase, was a symbol of resilience.
But apparently Grasso was in it for more than just patriotism. His 2001 compensation, paid during the NYSE's darkest hour, reached $25.6 million - including a $16.1 million bonus and a $5 million "special award." George Bush has asked all Americans to make sacrifices in the war against terrorism. Some die in Iraq. Others ring bells at media events and take home multi-million dollar bonuses for their troubles.
The rot exposed by Grasso is deeper than can be fixed by any tinkering with the NYSE's governance structure. It reflects the corrupt greed that is the engine of the U.S. economic model, both celebrated and reviled. Indeed, Grasso was ousted just as things were getting fun again on the stock market. U.S. markets are up over 20 percent since March, creating something like $4 trillion in paper "value" in the process. And thanks to the Bush tax cuts, targeted at financial investors, these gains are largely tax-free.
Yet in economic terms America has never been more divided, in stark contrast to Grasso's proclamation in 2001 that "we are one country today, committed, unified." The richest 1 percent of Americans owns half of all financial wealth - more than the bottom 90 percent put together. Share prices are booming in part because of widening corporate profit margins, driven in turn by a surprising surge in U.S. productivity. U.S. companies produce 6 percent more in GDP today than they did two years ago, but they do it with 2 million fewer workers. Most economists accept that higher productivity is good in the long-run, but for the time being this efficiency translates solely into mass layoffs for American workers. Perhaps this gap between Wall Street and Main Street, the widest ever, helps to explain why Grasso (unlike other better-paid business executives before him) had to go.
Yet surely Grasso's fall from grace is also a parable for the rise of American empire, and its surprisingly quick erosion, since September, 2001. The attacks were a horrific, heinous crime. But it is now clear that America's political and business elites responded to that crime in a particular and aggressive manner, making the most of new opportunities to reassert U.S. political and military dominance. Two years later, U.S. forces are mired in two small impoverished Asian countries, and the Western world is more divided than at any time since 1945. America's brash worldview has already lost as much credibility as the NYSE's compensation committee.
Richard Grasso stood before the world two years ago and pledged to fight the enemy, economically and militarily, in defense of his battered but proud nation. Now we've learned that perhaps the real enemy was within.
Jim Stanford is a research officer with the CAW. A version of this column appeared in the Globe and Mail
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